WDCD, LLC v. iStar, Inc.

ORDER GRANTING ISTAR INC.'S MOTION TO STAY
LITIGATION UNDER 9 U.S.C. § 3 OR, IN THE ALTERNATIVE, TO
DISMISS UNDER RULES 8, 12(B)(6), AND 12(B)(7)

DERRICK K. WATSON UNITED STATES DISTRICT JUDGE.

Before
the Court is Defendant iStar, Inc.'s Motion to Stay
Litigation Under 9 U.S.C. § 3 or, in the Alternative, to
Dismiss Under Rules 8, 12(b)(6) and 12(b)(7), filed August 1,
2017 (see ECF No. 13). For the reasons set forth
below, the Motion to Stay is GRANTED.

BACKGROUND

On
April 4, 2012, SFI Ilikai Retail Owner LLC, SFI Ilikai
Property Owner LLC, and SFI Ilikai 104 LLC (collectively
“SFI Parties”), as owners, and WDCD, LLC, as
consultant, executed a Development Consultant Agreement
(“Agreement”; Dookchitra Decl., Ex. A, ECF No.
13-1) in connection with the redevelopment and potential sale
of the Ilikai property in Waikiki. Mot. to Stay 1, ECF No. 13
at 6. The Agreement contains an arbitration provision
requiring that any controversy “arising out of or
relating to this Agreement or its breach, [] be submitted to
arbitration.” Mot. to Stay 1, 6 (citing Dookchitra
Decl., Ex. A [Agreement] § 7.14).

On
November 1, 2016, WDCD advised iStar, the SFI Parties'
parent company, of additional commissions that WDCD claimed
it was owed under the Agreement. Dorsey Decl. ¶¶ 2,
3, ECF No. 24-1. WDCD asserts that although it requested that
iStar arbitrate these commissions claims pursuant to the
Agreement, iStar refused:

I asked Mr. Dorsey [iStar's counsel] whether iStar Inc.
was subject to arbitration under the terms of the Development
Agreement. Mr. Dorsey replied that iStar had not signed the
Development Agreement and therefore could not be compelled to
arbitrate with WDCD. I asked Mr. Dorsey if iStar would
nevertheless agree to arbitrate WDCD's claims against it
and, consistent with my understanding of iStar['s] Motion
to Stay, he replied that iStar would not and that WDCD could
only arbitrate against SFI Parties.

iStar
claims to have never refused to arbitrate. Indeed, iStar
filed the instant motion on August 1, 2017, asking the Court
to stay the lawsuit “pursuant to Section 3 of the
Federal Arbitration Act in favor of arbitration”
because each of WDCD's claims arises out of the
underlying Agreement. Mot. to Stay 2. Additionally, on
September 19, 2017, iStar filed an Arbitration Demand and
Statement of Claims against WDCD with Dispute Prevention
& Resolution Inc. (“DPR”), seeking
adjudication of all rights arising out of or relating to the
Agreement, including those raised by WDCD against iStar in
the instant lawsuit. See Dorsey Decl., Ex. B
[Arbitration Demand], ECF No. 24-3.

On
October 13, 2017, the Court issued an order granting
iStar's Motion to Stay this litigation in favor of the
DPR arbitration that iStar had noticed on September 19, 2017.
ECF No. 27. On November 14, 2017, before the Court could set
forth its reasoning for doing so, the parties jointly filed a
Notice of Agreement to Arbitrate. ECF No. 30. Notwithstanding
this Notice, the Court offers the following explanation for
its October 13, 2017 decision.

LEGAL
STANDARD

The
Federal Arbitration Act (“FAA”), 9 U.S.C. §
1, et seq., provides that written arbitration
agreements “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or equity
for the revocation of any contract.” 9 U.S.C. §
2.[1]
The FAA provides that “any doubts concerning the scope
of arbitrable issues should be resolved in favor of
arbitration, whether the problem at hand is the construction
of the contract language itself or an allegation of waiver,
delay, or a like defense to arbitrability.” Moses
H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24-25 (1983); see also Mastrobuono v. Shearson
Lehman Hutton, Inc., 514 U.S. 52, 62 (1995); United
Steelworkers of Am. v. Warrior & Gulf Navigation,
363 U.S. 574, 584-85 (1960). “The standard for
demonstrating arbitrability is not high. The Supreme Court
has held that the FAA leaves no place for the exercise of
discretion by a district court, but instead mandates that
district courts direct the parties to proceed to arbitration
on issues as to which an arbitration agreement has been
signed.” Simula, Inc. v. Autoliv, Inc., 175
F.3d 716, 719 (9th Cir.1999) (citing Dean Witter Reynolds
v. Byrd, 470 U.S. 213, 218 (1985)). Indeed, the factual
allegations need only “‘touch matters'
covered by the contract containing the arbitration
clause” for arbitration to be triggered. Id.
(quoting Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 624 n. 13
(1985)).

In
deciding whether to compel arbitration, the court may not
review the merits of the underlying dispute. Instead, the
court must examine whether: (1) there exists a valid
agreement to arbitrate; (2) the parties' dispute falls
within their arbitration agreement; and (3) there exists
“a defense that would be available to a party seeking
to avoid the enforcement of any contract.” Brown v.
Dillard's, Inc., 430 F.3d 1004, 1010 (9th Cir.2005);
Republic of Nicar. v. Standard Fruit Co., 937 F.2d
469, 477-78 (9th Cir.1991); see also Lowden v. T-Mobile
USA, Inc., 512 F.3d 1213, 1217 (9th Cir. 2008)
(“[T]he court must determine (1) whether a valid
agreement to arbitrate exists and, if it does, (2) whether
the agreement encompasses the dispute at issue.”
(citation and quotation signals omitted)).

DISCUSSION

I.
iStar May Invoke the Arbitration Clause of the Agreement,
Notwithstanding its Non-Signatory Status.

The
parties do not dispute the validity of the Agreement, nor do
they dispute the presence of a binding arbitration clause
within the Agreement:

Any controversy between the parties regarding the
construction or application of any term or provision hereof,
or the performance of any services under this Agreement, and
any claim arising out of or relating to this Agreement or its
breach, shall be submitted to arbitration to be held in
Honolulu, Hawaii upon the written request of one party after
the service of that request on the other party. The
arbitration shall be conducted in accordance with the
Rules, Procedures, and ...

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